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Ringgit Up As Sentiment On Malaysia Improves

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KUALA LUMPUR: Sentiment towards the ringgit is finally turning around. The currency rose more than any other in emerging markets as Prime Minister Datuk Seri Najib Tun Razak was cleared in a corruption probe and oil traded 16% off its lowest in more than a decade.

The currency strengthened for a fourth day in the longest stretch of gains since September as Brent crude pared losses. The ringgit extended an advance beyond its 100-day moving average, a bullish signal for a currency that’s appreciated this month while most Asian counterparts weakened. With Najib now able to give his full attention to an economy hit by a slump in commodities, focus will be on today’s budget revisions for a clearer picture on the outlook.

“With the political risk out of the way, sentiment has improved,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd in Singapore. “Oil is also a big factor” and a rally in the benchmark stock index indicates investors think the budget “won’t be too negative.”

The ringgit rose 1.3% to 4.2380 a US dollar as of 2:26 pm in Kuala Lumpur and reached the year’s high of 4.2375, according to prices from local banks compiled by Bloomberg. The currency has strengthened 1.3% versus the dollar in January, compared with a 2.7% loss in the Indian rupee and the South Korean won’s 2.5% decline.

The FTSE Bursa Malaysia KLCI climbed 0.3%, adding to the 1.6% advance in the past two days. While the ringgit fell 19% in its biggest annual loss since 1997 last year, analysts are forecasting a less protracted slide in 2016. The currency will weaken to 4.41 per dollar, according to the median estimate in a Bloomberg survey.

Malaysia’s Attorney-General said on Tuesday that there was no evidence of wrongdoing by Najib over a US$681mil “personal donation” from the Saudi royal family. The money was transferred in early 2013 before the general election, Attorney-General Mohamed Apandi Ali told reporters, citing investigations by the anti-graft agency. Najib returned US$620mil in August that year that was not utilised, Apandi said.

The budget amendments would include measures to reduce operating expenditure and plans to privatise some projects, Secretary-General of Treasury Tan Sri Mohd Irwan Serigar Abdullah said on Jan 13. Najib seeks to trim the fiscal shortfall to 3.1% of gross domestic product this year from an estimated 3.2% in 2015. The slide in Brent to around US$31 a barrel has prompted a government rethink as this year’s spending and revenue plans assume a price of US$48.

The deficit goal would likely be revised slightly higher, said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. A new growth estimate for 2016 might also be announced from the current 4% to 5%, he said.

“The ringgit’s near-term fortunes remain tied to oil price developments, and further strength is dependent on the ability of oil prices to rally,” said Goh. “Domestically, the focus is on the budget revisions.” – Bloomberg

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